Cash-for-amendments scandal tip iceberg

March 31st 2011

Cash-for-amendments scandal just the tip of the iceberg

Unleashing one of the biggest lobbying scandals in EU history, the Sunday Times has in the last two weeks exposed four MEPs who had agreed to table amendments to change an EU law in return for promised payments. In a sting operation, undercover journalists from the UK newspaper posing as lobbyists for industry clients approached 60 MEPs inviting them to join the advisory board of a fake lobby consultancy firm and assist with influencing decision-making in the Parliament on behalf of the lobby firm’s clients. No less than 14 MEPs agreed to meet with the fake lobbyists to discuss the 100,000 euro per year offer. The Parliament should assess the broader problems revealed by the cash-for-amendments scandal. It is high time for some critical self-reflection and for action to curb the power of corporate lobbyists over decision-making in the Parliament.

The Sunday Times has in the last two weeks exposed four MEPs who had agreed to table amendments to change an EU law in return for promised payments. The Parliament should assess the broader problems revealed by the cash-for-amendments scandal. It is high time for some critical self-reflection and for action to curb the power of corporate lobbyists over decision-making in the Parliament.

New rules needed to curb power of corporate lobbyists in the European Parliament

Unleashing one of the biggest lobbying scandals in EU history, the Sunday Times has in the last two weeks exposed four MEPs who had agreed to table amendments to change an EU law in return for promised payments. In a sting operation, undercover journalists from the UK newspaper posing as lobbyists for industry clients approached 60 MEPs inviting them to join the advisory board of a fake lobby consultancy firm and assist with influencing decision-making in the Parliament on behalf of the lobby firm’s clients. No less than 14 MEPs agreed to meet with the fake lobbyists to discuss the 100,000 euro per year offer. Video footage released by the Sunday Times strongly suggests that Romanian MEP Adrian Severin, Austrian MEP Ernst Strasser, Slovenian MEP Zoran Thaler and Spanish MEP Pablo Zalba Bidegain accepted the offer. Thaler and Strasser resigned following the revelations, but Severin and Zalba have so far refused to do so. The Christian-Democratic PPE, the Parliament’s largest group, has defended Zalba, arguing he “did not accept money or compensation.” The video released by the Sunday Times shows that Zalba was planning to take up the offer and that he tabled an amendment that the ‘lobbyists’ had given him.

The Parliament President Jerzy Buzek has started an internal investigation, and Transparency International has called upon the Belgian Public Federal Prosecutor to take the lead and prosecute all four cases. The scandal has sent shockwaves through the European Parliament and kick started a debate about corruption and ethics, and also about the Parliament’s weak rules around financial interests and relations with lobbyists. Buzek told MEPs last week that the Parliament must “strengthen its code of conduct” for such cases and introduce “a legally binding code of conduct for lobbying in EU institutions”.

The European Parliament does indeed urgently need a sweeping overhaul of its rules on ethics and conflicts of interests, which are absurdly weak. In the past, many MEPs have been hostile to stronger rules in this field. This has led to bad habits, some of which have now been exposed by the scandal. The extent of the problem is underlined by the fact that 14 out of 60 (almost 25%) of the MEPs approached by the undercover journalists agreed to meet, apparently willing to take the offer seriously.

Many MEPs have a far too close a relationship with corporate lobbyists which results in undue influence for industry. Ernst Strasser, one of the accused MEPs, was covertly earning hundreds thousands of euros lobbying for industry while an MEP. All this was happening before the Sunday Times’ sting operation. He co-owned the consultancy firms CIN and CCE-Consulting, was employed by PR agency Hochegger and has lobbied for companies including Rail Holding and Group4Securior. This last company, ironically, handles security in the Parliament and so was responsible for sealing Strasser’s office to allow an investigation to be carried out. Austrian media reported in February that there were rumours that Strasser was using his role as an MEP to arrange meetings at the Commission for industry clients. Strasser denied this at the time, but the Sunday Times report suggests the rumours may have been true. Strasser was caught on tape saying: “Right now I have an excellent opportunity to get to know people, to build a network and use this for my company.” About being an MEP and a lobbyist at the same time, Strasser said: “Off course I am a Lobbyist”. “This is a very good combination. I see it now after one year: there are many people that are competing and who need something. And when one is there as a Parliamentarian this can open doors .”

There are no rules to stop MEPs having other jobs – and many MEPs do. A recent in-depth report published by Reuters exposed several examples of prominent MEPs with other jobs that appear to create conflicts of interest. The German MEP Klaus-Heiner Lehne is a partner at law firm Taylor Wessing, where he continues to work one day per week. Another German MEP Anja Weisgerber has a second job with another law firm, GSK Stockmann. Both these firms are involved in EU lobbying. MEP Edward Scicluna is the non-executive chairman of two Maltese investment funds linked to global bank HSBC. Veteran MEP, Elmar Brok is on the pay-roll of media giant Bertelsmann.

Many other examples could be added to this list. The Parliament’s lack of ethics rules even allows MEPs with such jobs to serve as rapporteur on legislation on issues where there are clear conflicts of interest. In the previous Parliament, the UK MEP John Purvis acted as a rapporteur for the Economic and Monetary Affairs Committee on a report on hedge funds, which argued for an industry-friendly, “light-handed [...] regulatory regime”. Purvis was also directly involved in the hedge-fund sector as Chair of the London-based recruiting arm of a Swiss company investing in hedge funds.

The Parliament clearly needs a strong ethics code to regulate against second jobs and other conflicts of interest. The ALTER-EU coalition, Transparency International and others have in the last weeks urged the European Parliament to “act to solve these problems once and for all”.

Hubert Pirker, Strasser’s replacement following the scandal, is also a former MEP-turned-lobbyist, who will now return to the European Parliament. After leaving the Parliament in 2009, Pirker has run EU-Triconsult, a lobby consultancy, with offices in Vienna and Brussels.

This revolving door with the lobbying industry raises general questions about the ability of MEPs to defend the public interest while in office, but also is a source of possible conflicts of interest and corruption. Future employment contracts may have been agreed – formally or informally - while the MEP was still in office. Such offers could be a reward for favours delivered while in Parliament.

Clearly, rules are needed to prevent MEPs from going straight through the revolving door into industry.

Another area where the Parliament is far behind in regulating against conflicts of interest concerns the gifts and hospitality received from lobbyists.

In the wake of this scandal, many MEPs have expressed support for mandatory lobby transparency, but also other complementary proposals for improving transparency and ethics have been made. The Dutch MEP Dennis de Jong called for a ban on gifts worth more than 50 euro. Thijs Berman, another Dutch MEP, demanded that all MEPs should on a regular basis publish lists of meetings they have had with lobbyists. Swedish MEP Carl Schlyter proposed “a register of every email sent to an MEP with the intention of changing a policy or a law, allowing the public to see where amendments originate.”

Schlyter’s proposal refers to the very widespread practice of MEPs submitting amendments written by industry lobbyists, for free. Even when there is no payment, this is an appalling abuse of the democratic system which frequently results in the absurd situation that the majority of amendments for important EU laws voted on in the Parliament are written not by MEPs, but by lobbyists.

This happened with the rules on testing and approval of chemicals a few years ago, for the new rules for hedge funds in 2010, and with the regulation on speculation in government bonds just last month. Too many MEPs seem to assume that what’s good for big business lobbies is good for Europe as a whole - a flawed assumption that helps big business distort important EU legislation. There’s a lot at stake. An amendment approved can mean millions of euros of earnings or savings for a firm or industry. It can also mean thousands more people suffering from health problems caused by unregulated toxic chemicals or economic misery caused by inadequate rules on banks and investment firms.

Another aspect of this problem is that a large share of the 736 MEPs are involved in cross-party groups, used by industry as vehicles for lobbying. There are dozens of such “MEP-industry forums”, funded by and frequently run by Brussels-based lobby industry groups and consultancies. Examples include the Forum for the Automobile and Society (FAS), the European Parliamentary Financial Services Forum (EPFSF) and the European Energy Forum, to mention a few. These forums are currently not bound by transparency and ethics rules, in contrast with the officially recognised “Intergroups” for which some very limited rules exist.

A growing number of MEPs are speaking out against the excessive influence of big business lobbies and against the MEPs that enable industry to capture EU decision-making. The Parliament should assess the broader problems revealed by the cash-for-amendments scandal. It is high time for some critical self-reflection and for action to curb the power of corporate lobbyists over decision-making in the Parliament.